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AUTHOR'S NOTE: Due to the Congressional recess, the Weekly Washington Healthcare Update will be distributed on a biweekly basis until after the Labor Day holiday. The next edition will be released Sept. 4, after which we will resume our regular weekly distribution schedule.

The White House announced $13.4 million in grants to build a law enforcement network of local, state and federal officials targeting the heroin trade and its impact in “high-intensity drug trafficking areas. (HIDTA)” HIDTAs were created by Congress in 1988.

About $2.5 million will fund public health partnerships in five such HIDTA regions spanning 15 states—Appalachia, New England, Philadelphia/Camden, New York/New Jersey and Washington/Baltimore—part of the administration’s Heroin Response Strategy.

Almost $4 million will go toward prevention efforts in 18 HIDTAs; another $1.3 million will go to programs along the Southwest border; and $500,000 will target the trade in tribal lands.

FDA Begins Device User Fee Talks with Patients and Consumers Sept. 15

FDA will begin its device user fee talks with patients and consumers on Sept 15. The agency has scheduled six patient and consumer stakeholder meetings required as part of the Medical Device User Fee Act (MDUFA) reauthorization. The meetings with public stakeholders—patient and consumer advocacy groups, healthcare professionals and scientific and academic experts—will run parallel to closed-door negotiations FDA holds with industry stakeholders. The purpose of these meetings is to develop a reauthorization package to send to Congress. The current MDUFA expires Sept. 30, 2017. If Congress does not reauthorize the program, the FDA will not be able to collect user fees from industry that help fund the agency’s medical device application review process. FDA has said that it hopes to have a draft of the agreement to send to Congress completed in October or November 2016.

HHS Announces Additional $169 Million in ACA Funding for Community Health Centers

Department of Health and Human Services Secretary Sylvia Burwell announced $169 million in Affordable Care Act (ACA) funding for 266 new health center sites in 46 states, the District of Columbia and Puerto Rico for the delivery of comprehensive primary health care services in underserved communities. These new health center sites are projected to serve 1.2 million patients, and the investment builds on the $101 million awarded to 164 new health center sites in May 2015. This investment will add to the more than 700 new health center sites that have opened as a result of the ACA.

The Centers for Medicare and Medicaid Services (CMS) released enrollment figures for its 2015 special enrollment period (SEP) on Aug. 13. Nearly 950,000 new consumers selected a plan through the HealthCare.gov platform during a SEP between Feb. 23 and June 30, 2015. A consumer can qualify for a SEP for such circumstances as loss of health coverage, losing Medicaid eligibility, changes in family status (for example, marriage or birth of a child) or other exceptional circumstances. Eighty-four percent of plan selections occurred via three types of SEPs: 50 percent of plan selections occurred because of the loss of health coverage or “minimum essential coverage”; 19 percent occurred because the individual was determined ineligible for Medicaid; and 15 percent were as a result of tax season issues. In May, CMS reported that it had 147,000 plan selections using the Tax SEP between March 15 and April 30. Since that time, approximately 3,000 consumers have returned to the Marketplace to select a plan using a different SEP reason code.

A fact sheet detailing state-by-state SEP enrollment figures can be found here.

The Centers for Medicare and Medicaid Services (CMS) announced that over 2,100 acute care hospitals, skilled nursing facilities, physician group practices, long-term care hospitals, inpatient rehabilitation facilities and home health agencies transitioned from a preparatory period to a risk-bearing implementation period in which they assumed financial risk for episodes of care. The participants include 360 organizations that have entered into agreements with CMS to participate in the Bundled Payments for Care Improvement initiative and an additional 1,755 providers who have partnered with those organizations. The initiative includes four models of bundled payments tied to inpatient hospital admission, with the models varying by the types of providers involved and the length of the bundle after the hospitalization. Through the Bundled Payments for Care Improvement initiative, CMS is testing how bundled payments for clinical episodes can result in better care, smarter spending and healthier people.

CMS Publishes Timeline for 2017 Medicare DMEPOS Competitive Bidding

The Centers for Medicare & Medicaid Services (CMS) today announced the timeline for the Round 1 2017 competition of the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program. CMS opens the bid window for Round 1 2017 on Oct. 15, 2015, and closes it Dec. 16, 2015. CMS is required by law to recompete contracts under the Competitive Bidding Program at least once every three years. The Medicare DMEPOS Competitive Bidding Program has saved more than $580 million in nine markets at the end of the Round 1 Rebid’s three-year contract period (Jan. 1, 2011–Dec. 31, 2013) due to lower payments and decreased utilization. The expansion of the Competitive Bidding Program—Round 2 and the national mail-order program—saved approximately $2 billion in its first year (July 2013–July 2014). In addition to the timeline, CMS also has started a comprehensive bidder education program, designed so that DMEPOS suppliers interested in bidding receive the information and assistance they need to submit complete and competitive bids in a timely manner.

CMS Releases Home Health Face-To-Face Electronic Template

The Centers for Medicare and Medicaid Services released its Medicare home health face-to-face electronic template Aug. 12 after more than a year of working on the prototype with stakeholders. In a Federal Register data collection request, the agency said it has developed a list of clinical elements in an electronic template “that would allow electronic health record vendors to create prompts to assist physicians when documenting the HH face-to-face encounter for Medicare purposes.”

The face-to-face requirement calls for physicians to document in-person encounters with patients to verify their eligibility for the program’s home health benefit. The agency has made changes from the previous version, including requiring physicians to compose the equivalent of narratives on homebound and skilled care need. While use of the electronic template is voluntary, documentation related to the reasons for skilled services and homebound requires a narrative explanation that is similar to the old face-to-face encounter document that agencies used. CMS has also added language to this template that was not on the last draft version posted in May, which some stakeholders believe may be confusing: “If the patient requiring home health services is being discharged to home from a hospital/acute care facility and the discharging physician will not be following the patient after discharge, then please identify the community physician who will be taking over care for the patient.” CMS has said that inadequate documentation supporting the face-to-face requirement was responsible for nearly 90 percent of the payment errors they reviewed. HHS pointed to face-to-face requirements as one driver of Medicare improper payment rates. Comments on the form and burden estimate are due Oct. 13, 2015.

On Aug. 12, the Centers for Medicare and Medicaid Services (CMS) announced another extension of the Medicare two-midnight policy, which will prevent Recovery Audit Contractors (RACs) from conducting patient status reviews of short-term hospital admissions through December 2015. Under Medicare Part A, the two-midnight rule says that physicians must anticipate Medicare beneficiaries will stay in the hospital at least two-midnights before admitting them for inpatient services, and that shorter hospital stays must be considered observation status, which reimburses hospitals at a lower outpatient rate.

Congress previously delayed enforcement RAC audits for the two-midnight rule through September 2015 in its Medicare Sustainable Growth Rate (SGR) legislation. Hospital groups have been lobbying CMS to extend the enforcement delay to better align its enforcement with changes to the two-midnight policy in the proposed 2016 outpatient payment rule that begins Jan. 1. The two-midnight policy was originally implemented in FY 2014. CMS said it will continue to accept comments on the two-midnight rule through Aug. 31, 2015, and will respond to comments in its final rule on or around Nov. 1, 2015.

HHS to Delay Enforcement of Transparency Reporting Provisions for Non-QHP and Non-Grandfathered Group Plans Due to Phased-in Transparency Reporting Plan

The Department of Health and Human Services (HHS) announced Aug. 12 in a Federal Register notice that it will again postpone enforcement of the Affordable Care Act’s (ACA) transparency reporting provisions for non-qualified health plans (QHP) and non-grandfathered group plans due to delayed data collection from insurers who offer QHPs on the exchanges using HealthCare.gov. Last year the Centers for Medicare and Medicaid Services (CMS) decided to postpone data collection until QHP issuers had a year of claims data.

In the notice, HHS asked for public comment from QHP insurers on transparency reporting. The notice also stated that CMS intends to phase in implementation for other entities, such as non-QHP individual coverage and non-grandfathered group plans, over time. The Centers for Medicare and Medicaid Services (CMS) will put out further detailed information on a future phased-in approach for the reporting requirements.

Under the ACA, issuers must report periodic financial disclosures; data on claims payment policies and practices, enrollment, disenrollment, denied claims and rating practices; and information on out-of-network cost-sharing and payments, enrollee and participant rights, and other criteria determined by the HHS Secretary. The ACA’s reporting provisions for off-exchange plans are aimed at providing transparency for off-exchange plans, such as self-funded employer-based plans that are exempt from many of the ACA’s reforms applied to QHPs.

3. State Activities

Alaska Legislature Sues Governor Over Medicaid Expansion

A joint committee of the Alaska Legislature has authorized a lawsuit against Governor Bill Walker concerning the process by which the governor chose to expand Medicaid. The Governor chose to unilaterally expand Medicaid under the Affordable Care Act. The Governor had made expansion a focus of his 2014 gubernatorial campaign, and announced in July that he would expand Medicaid without the support of the legislature.

Maryland SHOP Exchange Launched

Maryland’s SHOP exchange for small businesses began this month. Maryland chose to fix major technical problems with its individual market exchange before launching the SHOP exchange. Maryland has chosen three third-party administrators to set up online portals for businesses to enroll in SHOP plans.

Arkansas Moves Ahead with a 10-day Income Verification for Medicaid

CMS has not raised objections to Arkansas’ eligibility redetermination process that is giving enrollees only 10 days to verify income information before facing termination of their coverage. The Arkansas process is modified because its IT system is not capable of sending beneficiaries pre-populated forms. However, there are still disagreements about what Arkansas is allowed to do. Consumer groups say enrollees should have at least 30 days to respond to the state because federal rules require that amount of time for Medicaid renewals. There are situations where states can impose a 10-day window for enrollees to respond to income verification requests.

Arkansas Pharmacy Law Subject to Suit

The Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers, is suing Arkansas to stop implementation of an Arkansas law passed this year that mandates pharmacies be reimbursed for generic drugs they dispense at or above the pharmacy acquisition cost. The current reimbursement system for pharmacy benefit managers, which utilizes maximum allowable cost lists, does not change on a timely basis. This leads pharmacists to lose money when dispensing certain generic drugs. Twenty-four states have passed laws to address the problem of generic drug price increases. The National Community Pharmacists Association supports the Arkansas law.

Kansas Governor Uses CHIP Funds for Budget Hole

Governor Sam Brownback has decided to use the increased federal funding for CHIP to help fill a $63 million hole in the state’s budget. The CHIP funding transfer will supply $17.6 million. A 2010 state law expanded CHIP eligibility for children from 200 percent of the federal poverty level to 250 percent, but due to an indexing provision in the law, current eligibility stands at about 244 percent of poverty level.

The state legislatures of Massachusetts, Pennsylvania and Ohio are currently considering legislation to limit drug prices. Residents in California are also pushing a ballot initiative that would limit drug prices to the rates paid by the Department of Veterans Affairs. If the ballot initiative were successful, it would lead to the introduction of price cap legislation in the state legislature.

The Massachusetts legislation (Senate Bill 1048) would force companies producing drugs on a “critical prescription drug list” to make public costs related to: production, research and development, marketing and advertisement. Additionally, the companies would have to make public prices charged outside the United States, prices charged to Massachusetts purchasers and prices paid by pharmacy benefit managing companies.

Drug price transparency bills that do not include price caps or other limits have been introduced in several states, including North Carolina, Oregon, California, New York and Minnesota.

The Centers for Medicare and Medicaid Services (CMS) issued a final rule on July 31, 2015, to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percent adjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable Care Act and further adjusted by - 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic health records will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued - 1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonuses and penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be published in the Federal Register on Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

On July 1, the Centers for Medicare & Medicaid Services (CMS) announced the release of the Calendar Year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions and payment rates proposed rule. The CY 2016 OPPS/ASC proposed rule recommends updates to Medicare payment policies and rates for hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs), and refinements to programs that encourage high-quality care in these outpatient settings. CMS suggested a decrease of 0.1% for outpatient payment rates. Moreover, it suggested an additional 2 percentage point adjustment to be included to account for inflation in OPPS payments to an increase in payments for laboratory tests. Approximately 3,800 hospitals and 60 CMHCs are paid under the OPPS, while approximately 5,300 ASCs are paid under the ASC payment system. The OPPS provides payment for most HOPD services, including partial hospitalization services furnished by HOPDs and CMHCs. OPPS payment amounts vary according to the Ambulatory Payment Classification (APC) group to which a service or procedure is assigned. This proposed rule also includes suggested changes to the Two Midnight Rule for CY 2016. The proposal was published in the July 8, 2015, Federal Register online. Comments on the proposed rule are due on Sept. 4, 2015.

A fact sheet on the proposed changes to the Two Midnight Rule for CY 2016 can be found here.

CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule

On July 6, the Centers for Medicare & Medicaid Services (CMS) announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2016, including updating requirements for home health agencies under the Medicare program and moving forward to implement the third year of the four-year phase-in of the rebasing adjustments to the HH PPS. Finalized in the CY 14 final rule, the CY 16 downward adjustment is $80.95. Home health agencies (HHA) are paid a national standardized 60-day episode payment for all covered home health services, adjusted for case-mix and area wage differences. CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72 percent in each of CY 2016 and CY 2017. CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY 16. The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode and other relevant factors.

Also in the proposed rule, CMS included further implementation of provisions within the IMPACT Act, including one standardized cross-setting measure for CY 2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, although CMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

Resource use, including total estimated Medicare spending per beneficiary;

Discharge to the community; and

Medication reconciliation

CMS also announced the launch of a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across the nation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation, the HHVBP model draws upon the lessons learned from other value-based purchasing programs and demonstrations — including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance and Nursing Home Value-Based Purchasing Demonstrations — to shift to a model that promotes the delivery of higher-quality care to Medicare beneficiaries. CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation. HHAs in the nine states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) would have their payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third payment adjustment year and 8 percent in the final two payment adjustment years based on their performance across a series of quality metrics. CMS estimates approximately 3.5 million beneficiaries receive home health services from approximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

Published in the Federal Register July 8, the proposed rule can be found here. CMS will solicit public comments on the proposed rule until Sept. 4, 2015.

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the Sustainable Growth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused on person-centered care, and continues the Administration’s intention to transition the Medicare program to a system based on quality and healthy outcomes. In the proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA, including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5 percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System, which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties a portion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systems survey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistants and other non-physicians. In the proposed rule, CMS is additionally seeking comment on the potential expansion of the Comprehensive Primary Care Initiative, a CMS Innovation Center initiative designed to improve the coordination of care for Medicare beneficiaries. Other items included in the proposed rule include an initiative that supports patient- and family-centered care for seniors and other Medicare beneficiaries by enabling them to discuss advance care planning with their providers.

For a fact sheet on the proposed rule, please see here. For further information, please see the rule on display here. CMS is accepting public comments on the CY 2016 PFS proposed rule until Sept. 8, 2015. The proposed rule will be published in the Federal Register on July 15, 2015, and CMS will issue the final rule by Nov. 1.

CMS Releases Proposed 2016 Medicare Dialysis Pay Rule

The Centers for Medicare and Medicaid Services (CMS) released a proposed 2016 Medicare Dialysis pay rule June 26 which includes several technical changes including a new drug designation process, a new rural pay adjuster, and updates to the end-stage renal disease Quality Incentive Program- the base pay rate for services and the adjusters to that base rate. Specifically, CMS proposes reducing the base pay rate by $9.23, from $239.43 in 2015 to $230.20 in 2016. Other pay changes include updates to the low-volume payment adjustment and a new payment adjustment for rural ESRD facilities. Further, the proposed rule would revise the geographic proximity eligibility criterion for the low-volume payment adjustment from (25 road miles to 5 road miles) and would eliminate grandfathering from the criteria for the adjustment. CMS also suggests reducing the fixed-dollar loss amount for pediatric beneficiaries from $54.35 to $49.99 and the Medicare Allowable Payments for pediatric patients from $43.57 to $37.82. For adults, the fixed-dollar loss amount would decrease from $86.19 to $85.66 and the Medicare Allowable Payments amount would decrease from $51.29 to $48.15.

Other specific changes include:

A process for understanding when an oral-only drug is no longer considered an oral-only drug

A process for including new injectable and intravenous products into the ESRD bundled payment

Changes to quality measures and implementation of payment reductions for low preforming facilities

CMS expects that combined these updates would increase the total payments to all dialysis facilities by 0.3 percent with Hospital-based facilities receiving an increase in total payments of 0.5 percent, and freestanding facilities receiving a 0.2 percent increase. The proposed rule will be published the Federal Register on July 1. Comments on the proposed rule are due August 25, 2015.

FDA Issues Final Rule to Phase Out Trans Fats

The Food and Drug Administration (FDA) issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

On May 18, the Food and Drug Administration (FDA) released draft guidance in hopes of clarifying ways in which adaptive clinical trial designs can be used for medical devices. Specifically, the draft guidance lays out 11 types of adaptive trial designs the agency feels can be successfully used for devices: group sequential design; sample size adaptation; Bayesian sample size adaptation; group sequential designs with sample size reassessment; dropping a treatment arm; changing the randomization ratio; changing the hypothesis (claim); adaptive enrichment; planning to adapt based on the total information; adaptation of the device or endpoint; and seamless studies. The draft document also makes clear that the adaptive trial designs discussed apply to premarket approval applications, 510(k) submissions, de novo submissions, humanitarian device exemptions and investigational device exception, and do not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. Worth noting, FDA says there are possible limitations to using adaptive trial designs, including requiring more effort at the design stage—leading to study designs that are overly complicated and cost more and to the introduction of bias into the study; implementing changes to the study due to an adaptation can “confound interpretation of the study results.” FDA says in the guidance that to ensure that adaptive trial designs are scientifically valid, studies should be prospectively planned for in consultation with FDA prior to the initiation of any study, and the agency lays out two approaches that can help evaluate the operating characteristics of adaptive study designs—analytical methods and simulation studies.

The Government Accountability Office (GAO) released a report Aug. 10 that analyzed Medicaid claims paid in fiscal year 2011, for four states: Arizona, Florida, Michigan and New Jersey. The GAO looked for indicators of potentially fraudulent or abusive prescribing activities and to what extent federal and state oversight processes were in place to prevent and detect instances of prescription-drug fraud and abuse.

In its analysis, the GAO found that more than 16,000 of the 5.4 million Medicaid beneficiaries potentially engaged in “doctor shopping,” by visiting five or more doctors to receive prescriptions for antipsychotics or respiratory medications. These prescriptions were valued at about $33 million. The GAO reported that about 700 beneficiaries received more than a one-year supply of the same drug in 2011, at a cost to Medicaid of at least $1.6 million, which the GAO says is an indicator of drug diversion.

The GAO identified two potential controls that are not included in the Centers for Medicare and Medicaid Services’ (CMS) current reporting requirements: lock-in programs for non-controlled substances (to prevent doctor shopping) and prohibition of automatic prescription refills. The GAO recommends CMS require states to report information about specific drug-utilization review controls to determine whether additional guidance is needed.

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